Tesco confirmed today that it will not be extending its purchasing alliance with French retail giant Carrefour beyond 2021.
The two supermarket groups formed an alliance in 2018 to cover their dealings with global suppliers, the joint purchasing of own-label products, and goods not for resale such as store equipment and cleaning supplies. It was aimed at securing better deals from multinational suppliers and cutting costs to help them combat increased competition in their domestic markets from discounters and online retailers.
A brief statement issued by Tesco today said: “Over the last three years, Tesco and Carrefour have benefited from a number of joint buying opportunities across food and general merchandise categories, enabling access to new suppliers, new sources and new products.
“Moving forward, both companies have agreed that they will continue this work independently and focus on their own opportunities, building on the experience and the progress made during the alliance period.”
The alliance will run until the end of 2021 and then end.
Reports suggested that the decision to part ways was because the alliance did not offer big enough savings to warrant an extension beyond the initial three-year operational framework.
A spokesperson for Tesco later denied that the UK’s recent departure from the EU had influenced the decision to call time on the partnership.
Clive Black, a retail analyst at Shore Capital, commented: “For whatever reason, regulatory, cultural, and operational, there would appear to be little notable benefit from the alliance on an ongoing basis.”
He added that the move was not a great surprise, given that other attempts to pool buying power had delivered minimal gains. “In truth, the outcome is far from clear or impressive for major players; apart from bananas, it was not especially evident in food for Asda in the UK being part of Walmart, never mind other buying groups,” Black said.
NAM Implications:
- Allegedly because the alliance did not offer big enough savings…
- i.e. an indication of harmonised prices & terms by global suppliers.
- A pointer for all?
